On 29 July 2016, the Financial Conduct Authority (FCA) published a policy statement on the reporting of financial crime (PS 16/19). In this statement, the FCA summarises the responses it received to its December 2015 consultation on the introduction of the financial crime report (CP 15/42). Chapter six of CP 15/42 reflects the FCA's proposal for the amendment of chapter 16 of the Supervision manual, in order to enable the FCA to obtain regular, accurate and consistent data to identify financial crime risk. The FCA has also taken on board the comments on its publication of the proposals in a quarterly consultation paper and it has accordingly published the final rules in a standalone policy statement to maximise transparency.
The FCA received 32 responses from firms and trade associations. Although the majority of the respondents were supportive, many of them required further clarifications on definitions and guidance notes. Many expressed concern about the implementation and reporting timescales, as well as about the requirement for single-entity reporting.
The FCA addressed the feedback received and touched on the following issues: implementation and reporting timescales, group reporting, guidance and definitions, including operating jurisdictions, customer information, compliance information, sanctions-specific information and fraud, electronic money institutions, revenue thresholds for intermediaries, investment firms and consumer credit firms and publication of aggregated financial crime data.
The most important of the changes introduced are summarised below.
1. The FCA excludes both pure general insurers and general insurance intermediaries, as well as credit unions from the initial implementation. It aims, however, to bring them into scope at a later date.
2. Revisiting the length of the remittance period, the FCA doubled the submission period from 30 days to a total of 60 days. A firm with a 31 December year end is now required to submit the Financial Crime Return in late March. The implementation will proceed in the existing timeframe, but the FCA will only expect firms to submit the Financial Crime Return on a best endeavours basis for the first reporting cycle.
3. T he FCA implements an optional group submission mechanism for the Financial Crime Return and submitters will have the option to submit on a group or single regulated entity basis, as long as the firms included all share a common financial year end.
4. The FCA decided to apply a 5 million revenue proportionality threshold to investment firms, in addition to intermediaries, electronic money institutions and full permission consumer credit firms.
5. The FCA requires firms to report only those jurisdictions that the firm either `operates' in or has assessed as high-risk, within the last two years. The FCA has adjusted the definition of `operates' to `where the firm has a physical presence through a legal entity or actively markets its services'.
The Handbook provisions come into force on 31 December 2016